OPEC raised its estimate of demand for its crude oil this year because of lower-than-expected supply from producers outside the group.
The Organization of Petroleum Exporting Countries raised its estimate of demand for OPEC crude by 500,000 barrels a day for the second quarter and increased third- and fourth-quarter estimates by 100,000 barrels a day. Daily demand for OPEC crude will average 30.7 million barrels in 2008, versus 30.8m. in 2007, Vienna-based OPEC said in a monthly report today.
OPEC, which supplies about 40 percent of the world's oil, cut its estimates for oil supply from outside the group, including the North Sea, where field maintenance helped boost Brent crude futures above $78 a barrel in London today for the first time in 11 months.
OPEC said Norway's oil production dropped to a 13-year low in May and June because of "early and heavier than normal maintenance as well as the shut down of the Ekofisk and Kvitebjorn fields.'' The group cut its estimate of 2007 oil supply from outside OPEC by 190,000 barrels to 50.4m. barrels a day, citing "weak performance" in Norway, which led to a corresponding 200,000 barrel-a-day increase to its estimate for this year's demand for OPEC crude.
OPEC left its estimate of 2007 world oil demand unchanged at 85.6m. barrels a day and in its first forecast for 2008 said demand will rise 1.5 percent next year to 86.9m. barrels a day. In a separate report last week, the International Energy Agency forecast a larger gain in demand next year of 2.5 percent.
Deutsche Oil Forecast Deutsche Bank AG today raised its "long term" oil price forecast to $60 a barrel, from $45, saying that the outlook is "extremely bullish" because there is "no sign that $60 is a serious problem for global economic growth, nor a significant driver of supply growth." The downward revision is similar to a 200,000-barrel-a-day cut in the IEA's 2007 estimate for non-OPEC supply.
"The oil market in 2008 is shaping up to be quite similar to the current year," the report said. In 2008, OPEC expects strained refining capacity "supporting high product prices and frequent refinery outages exerting further upward pressure, despite the healthy crude oil market."
While the monthly report doesn't contain forecasts for OPEC's own crude oil supply, it gives estimates for the quantity of crude OPEC would need to pump to balance world supply and demand. The projected demand for OPEC crude rises to 31.1m. barrels a day in the fourth quarter, which compares to last month's production of about 30m. barrels a day.
A "wide range of forecasts across industry sources reflect a high level of uncertainty regarding the demand for OPEC crude," the OPEC report said. "This is further complicated by considerable and persistent revisions over the last three years to both demand and non-OPEC supply forecasts, which have a significant impact on the required level of OPEC crude."
The IEA last week said demand for OPEC crude will peak at about 33m. barrels a day in the fourth quarter.
Oil production is declining in some non-OPEC producers, including the UK, Norway and Mexico. Accelerated declines in mature oil fields for non-OPEC producers and project delays caused by high costs will carry over into 2008 when non-OPEC supply rise by 1m. barrels a day to 51.4m. barrels a day, OPEC said.
The report didn't alter OPEC's production policy, which calls for 10 of its 12 members to reduce crude supply to 25.8m. barrels a day from September's daily pace of 27.5m. barrels a day.
Those ten, which excludes Iraq and Angola, pumped 26.38m. barrels in June, down 22,000 barrels a day from May, according to the report.
which cited an average of secondary sources, or estimates from analysts and news agencies.
As a whole, all 12 OPEC members pumped 30.0m. barrels a day in June, down 96,600 barrels a day from May. The biggest monthly declines in June daily production came from Iraq, Kuwait, Venezuela and Saudi Arabia, which fell 78,000, 38,300, 34,000 and 33,300 barrels, respectively, while the biggest gain was a 77,000-barrel-a-day rise in Nigeria, the OPEC report said.
OPEC Secretary-General Abdalla El-Badri said last week that US crude inventories are ample at nine-year highs so extra crude isn't needed. OPEC ministers meet next on September 11 in Vienna.
Still, many analysts doubt OPEC will push further with its commitment to reduce supply, especially with near-record prices.
"I don't think OPEC countries will reduce production," Francisco Blanch, the head of commodities research at Merrill Lynch & Co. in London, said in an interview today. "Quite the opposite, I believe that OPEC will increase its production."
Goldman Sachs Group Inc. said in a report today that an increase in production from Saudi Arabia, the United Arab Emirates and Kuwait by the end of the summer is "critical" to avoid prices surging above $90 a barrel this autumn.
Although a signal by OPEC to raise output would probably lead to a plunge of between $5 and $10 as speculators exit, "such a pullback would likely prove temporary given the strong underlying fundamentals, the lag in production increases reaching markets and the vulnerability created by reduced spare production capacity," Goldman analysts led by Jeffrey Currie in New York said.
Join Jerusalem Post Premium Plus now for just $5 and upgrade your experience with an ads-free website and exclusive content. Click here>>